Tax relief law raising rates instead
Elected officials in some big counties, cities say they must brace for reforms
A statewide property tax relief plan that takes effect next year is prompting hefty tax increases this fall in many of the biggest cities and counties in Texas, even in places that have historically kept rates flat or decreased them.
Elected officials in some cities and counties say they have no choice but to raise taxes as high as they can this year to brace for the implementation of property tax reforms that Republican Gov. Greg Abbott and the Texas Legislature called historic earlier this summer. The average effective tax rate for single-family homes in Texas was 2.18 percent in 2018, third-highest in the nation, according to a study by ATTOM Data Solutions.
Starting next year, cities and counties will be barred from increasing property tax collections more than 3.5 percent in any year without a vote of the public. Currently, the state has an 8 percent limit, called the rollback rate, that state lawmakers say has allowed cities and counties to overtax homeowners. The lack of a state income tax makes Texas municipalities especially reliant on property tax revenue.
A look around the state shows many counties and cities are pushing rates to the 8 percent rollback rate this year to bank money or, in a few cases, even to fund pay raises for themselves, in reaction to the new law. El Paso, Harris, Tarrant, Webb and Travis counties are among those pushing to the current rollback rate, or near it. And cities including El Paso, Arlington, Corpus Christi and Austin are similarly considering rates at or near the 8 percent limit.
“I think a lot of cities and counties know that we are putting them on a diet and they are going on one last bender before it happens,” said state Rep. Dustin Burrows, R-Lubbock, who was a key player in crafting the property tax reforms as the leader of the House Ways and Means Committee.
As Burrows and state Sen. Paul Bettencourt, R-Houston, worked on the bill that would ultimately become law, counties and cities warned that it could force governments to push for big increases this year to offset future declines in revenue. Still, Bettencourt said the fact that many are following through on that threat is indefensible.
“This is just a smashing of the taxpayers when you have the chance,” Bettencourt said.
Local government leaders say it is the Legislature’s fault for essentially capping their future tax collections.
“It is unfortunate that the Legislature has put local governments in Texas in this position,” Travis County Commissioner Brigid Shea told the Austin American-Statesman.
Not all cities and counties are hitting the limit. Houston can’t, because of a voter referendum that bars the city from raising property tax collections over 4 percent. And in San Antonio, City Manager Erik Walsh noted the City Council considered pushing to the 8 percent rollback limit earlier in the summer, but ultimately
left the overall tax rate flat, which will generate about a 2.4 percent increase in tax revenues because of rising assessments.
Bexar County has also called for keeping the tax rate flat.
In Travis County, raising the effective tax rate by 8 percent will generate over $50 million in additional revenues, which includes more than $17 million for pay raises, including for elected officials. For an average home in Travis County valued at $347,000, that will mean an increase of $126 in the county share of the property tax bill.
In Harris County, which hasn’t raised the tax rate in decades, county officials say the state’s new restrictions are forcing them to react by raising the tax rate by 2.26 cents per $100 of assessed value. County Judge Lina Hidalgo said the county needs to create a contingency fund to ensure it can pay for services, such as health care, transportation and flood control, once the state’s 3.5 percent cap goes into effect. The rate increase, if approved next month, would allow Harris County to collect more than $200 million extra in tax money than last year.
Even places that were praised by the Legislature for their past fiscal restraint are raising property taxes more than usual. In the spring, Bettencourt was calling El Paso County one of the “good counties” because it hadn’t raised its property tax collections by more than 2.5 percent a year for at least five years straight.
But this year, El Paso County has approved a budget that increases the tax rate 9.2 percent and generates 8 percent more in tax revenues that will help fund, among other things, pay raises for the county judge and the commissioners. County Judge Ricardo Samaniego told the El Paso Times that the pay increases had to come this year because of the tax reforms.
In El Paso, tax increases by the county and the hospital district will raise the tax bill of an average-value home — $133,590 — by $82. The city is also raising taxes, and pushing increasing its rate by 8 percent.
Webb County in the Rio Grande Valley is taking similar steps, preparing to vote on a budget next week that would increase property tax collections 8 percent to help pay for a $20,000 pay raise for the county judge and $17,000 pay raises for the county commissioners. The commissioners now make $78,000 a year and the county judge makes $97,000 a year, according to the Laredo Morning Times. The raises are based on a market study that showed they are paid less than average, the Morning Times reported.
Bettencourt said he’s disgusted that county officials would use the Legislature as cover to increase their own salaries.
“I don’t care if you are a Democrat, a Republican or an independent, that is the worst excuse for a pay raise,” Bettencourt said.
Property tax reform has proven to be elusive in Texas over the last two decades. Previous attempts have often resulted in temporary breaks or none at all because of a variety of factors, including the steady upward march of home values in urban areas and suburbs.
But this year, Texas lawmakers passed a series of reforms they are convinced will help finally provide homeowners cover from growing tax bills. Besides the lower rollback rate, the plan Abbott signed into law caps school district increases at 2.5 percent year-overyear and creates online real-time tax notices with clearer information for homeowners that show them who is trying to raise their taxes and where and when to fight it.
Abbott isn’t happy with cities and counties trying to essentially offset his long championed tax relief efforts.
“The irresponsible tax hikes by cities and counties is exactly why passing property tax reforms this session was so important,” said John Wittman, a spokesman for Abbott. “Beginning in 2020, city and county officials will no longer be able to raise property taxes with impunity. In the meantime, they are trying to squeeze the taxpayer for all they are worth. Voters in these cities and counties should hold their local officials accountable.”